Overtime and Public Holiday Pay in Malaysia: A Payroll Guide
Who is entitled to overtime pay in Malaysia, the minimum rates for normal days and rest days, and how to handle public holidays in payroll.
Overtime and public holiday pay are among the most common sources of payroll errors, and of staff complaints. Here is a practical overview for employers.
Who is entitled to overtime pay?
Since the 2022 amendments came into effect on 1 January 2023, the Employment Act applies to all employees, but overtime entitlement does not extend to everyone. In general, overtime pay applies to employees earning up to RM4,000 a month, as well as certain manual and similar roles regardless of wage. Employees above the threshold may still be paid overtime if their contract says so.
Minimum overtime rates
- Overtime on a normal working day: at least 1.5 times the hourly rate of pay.
- Overtime on a rest day: at least 2 times the hourly rate.
- Work on a public holiday attracts higher rates, which depend on whether the work is within normal hours or overtime. Check the Act for the exact multiples.
Getting the hourly rate right
The hourly rate is based on the employee's ordinary rate of pay, calculated according to the Act's formula for monthly-rated employees. Define which allowances count as part of the ordinary rate and apply the same method every month.
Public holidays
Covered employees are entitled to a minimum number of paid public holidays each year. Some are mandatory, while others can be chosen by the employer from the gazetted list. If employees work on a public holiday, they are entitled to extra pay or a replacement day according to the Act and the contract.
Controls to put in place
- Require written approval before overtime is worked.
- Keep reliable attendance records, such as clocking data.
- Review overtime hours per person each month, and watch for regular heavy overtime, which is both a cost and a wellbeing issue.
- Be aware that overtime is also subject to limits under regulations.
- Show overtime, allowances and deductions clearly on the payslip.
This article is general information, not legal advice. Check the latest official guidance (HRD Corp, Ministry of Human Resources, Labour Department) for your situation. The rules in Sabah and Sarawak differ. TEM can set up overtime rules in your payroll and review your calculations.
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